New therapies are in development for COPD (endobronchial valves/stents/glue) and asthma (endobronchial thermal ablation). Hyperpolarized xenon-129 (HXe) MRI, a noninvasive method to assess regional lung structure and function, may prove critical in the guidance of these regional treatments. In our prior work we developed an innovative approach to xenon polarization that provides the liter quantities of highly polarized xenon-129 as required for medical imaging. Our prototype system was deployed at UVa where we performed 600 experiments in 64 patient and healthy volunteers and made significant advances in MR acquisition strategies and image quality. These promising results enable us to move to the next step in the commercialization of HXe, the performance of a Phase 2 clinical trial. Our goals for Phase 2 are to collect safety endpoints in patients with obstructive lung diseases, finalize the HXe dosing and MRI methods, and validate the HXe results by comparing with the existing clinical methods for assessing lung function and microstructure. We selected the two most mature and promising HXe techniques for inclusion in the Phase 2 trial: ventilation and diffusion imaging. Obstructive lung diseases such as COPD and asthma have been shown to have regional abnormalities of ventilation and these abnormalities are prime targets for intervention. Thus our first aim is to validate HXe MRI for the intended use of delineating ventilated and unventilated regions of the lung in COPD and asthma patients. For our Phase 2a trial we will compare HXe ventilation MRI and 99Tc DTPA ventilation scintigraphy (a clinical standard for assessing regional lung ventilation) in 10 healthy volunteers and 70 patients with COPD and asthma. In addition to the patient safety data, we will assess total lung volume and ventilated lung volume on MRI, and the congruence of ventilated volume boundaries between HXe MRI and scintigraphy. Recently completed pilot studies show that hyperpolarized helium diffusion imaging with six b-values can separately determine diffusion coefficients along and transverse to acinar ducts, which are related to alveolar depth and duct diameter. Our second aim is to validate HXe diffusion MR for the intended use of quantifying alveolar enlargement in emphysema, a fundamental abnormality that currently is assessed only by histology. For our Phase 2b trial we will perform diffusion HXe MRI in vivo in 18 COPD patients scheduled for lung transplant, and repeat the scan in the ex vivo lung after it is removed, thereby establishing that in vivo and ex vivo HXe measurements are concordant. The final step in the validation of the HXe diffusion measurement is to regionally compare alveolar size with morphometric measurements via histology from the explanted lung. The final portion of the proposed work is to raise quality to Phase 3 level, design a draft Phase 3 trial, meet with the FDA for a pre-Phase 3 meeting, and incorporate the FDA input into the Phase 3 protocol. The completion of the proposed work represents a significant advancement towards commercialization of HXe.